HR is planning on implementing a spousal surcharge in 2016. I was wondering how others process this.

1. Do you make it pre-tax or post-tax?

2. Is it an additional deduction or do you add it to the premium? Does this affect it's pre-tax/post-tax status?

3. We currently offer a Cash Award to employees who opt-out of our insurance. If the opting out employee's spouse also works for the organization, do you charge then the surcharge if they pickup their spouse (who is an employee)? If so, does the waiving spouse still receive the cash award?

4. What about Domestic Partners?

Thank you

For Part I item 2, is it appropriate to report negative amounts, which seem to be less than $5,000. Recordkeeper and service provider are Fidelity who completed the form on their own with an amount about $(100,000)

I have a client whose business is an exempt service business, and whose wife is a real estate agent. He has a DB plan with himself as the only participant.

It appears that neither has any interest in or connection with the other's business, so I am not sure of the ownership attribution in this case.

He is the only employee in his plan, and wants to know if he should be paying PBGC premiums.

She does not have a plan.

normally employees would be considered to have a severance from employment and be entitled to distributions. does it make a difference that the entity acquiring the assets is a partnership and whether or not they are acquiring 85% of the assets?

we have a 401(k) plan effective 7/1/2014 - the owner makes well over 260,000 - isn't his compensation limited to 130,000 and are his contributions limits halved as well? We think his Safe harbor 3% is based on the 130,000 but an actuary says he is able to receive 52,000 total in contributions for 2014. Im researching, but need some feedback and cites if possible. Thanks.

A participant defaulted on a loan and though it was a deemed distribution, a 1099-R was not filed to report it. He went on to repay the entire outstanding balance afterwards which I understand should be considered an after-tax amount within the plan. Are the repayments still considered to be after-tax amounts if the defaulted loan was not reported as a taxable event when it became a deemed distribution?

If the repayments are to be treated as after-tax amounts, I presume that when it's time to distribute them that earnings on those amounts are taxable.

In last 2 days I have had 3 December year end clients have their extensions denied.

The denial lists October as the Tax Period. So the IRS is picking up the month we are extending to as the plan year end.

Am I the only one?

Any ideas on how this is happening?

Thanks

Earl

Let's say a plan excludes all years of vesting service prior to age 18. How does that provision actually affect a participant.

Let's say someone turns 18 during the plan year. While the participant worked over 1,000 during the whole year, the participant only worked 500 hours since turning 18 (the plan required 1,000 hours to get a vesting year of service). Does the participant get full vesting credit for that year since he turned 18 during the year, or are the hours prior to his 18th birthday excluded for vesting purposes?

A plan had a single late deposit of $250 (due to an off-cycle paycheck to a terminated employee). Is there IRS authority saying that there is no need to file the 5330 or pay the excise tax if the tax is less than $1.00?

We have several people who received too much match (per the formula) in 2014. Quick fix is to remove the excess amount from the partiicpants' accounts and have the plan administrator use the proceeds to fund future ER cotnribuitons.

In the past, I would include earnings in the amount removed. Someone is now questioning that method. Is there anything that requires me to include investment experience along with the over-match amount?

The only thing I can point to is the general correction principle of EPCRS that the plan be put in the position it would have had the error not occurred.

Is there anything specific that details what is to be done in this case? EPCRS seems to address mostly under-contributions or overpayment of distributions. Did I miss something there? Should I turn my attentions elsewhere?

We have a partner that receives a K-1 with line 14 showing amounts with code A as well as code B. Is the code B amount included in plan compensation? Thanks!

Note:

Line 14: Self-employment earnings (loss)

code A: Net earnings (loss) from self-employment

code B; Gross farming or fishing income

code C: gross non-farm income

I voluntarily left my position at an ESOP company (Company X) in 2013 after being fully vested, with $ 100,000+ ESOP account balance at the time of my departure. I was notified that my ESOP distributions would begin somewhere around the fifth year from my leaving Company X. Myself, along with a few others who left the company work for direct competitors of Company X. In early 2015, Company X put in a "Competitor" clause to their ESOP bylaws that states that it will void the ESOP benefits of any employee who leaves the company to work for a direct competitor. Company X has also sent letters to fully vested employees who left the company in 2013, stating that they will be disqualified from their ESOP distributions according to this new "Competitor" clause just put in place in the 2015 bylaws. Can a company modify their ESOP bylaws to avoid paying out ESOP distributions to employees who have already left the company to work for a direct competitor?

Do people see what I see in the new final regulations concerning the handling of the quarterly contribution requirements?

1. The regulations finally authorize the use of standing elections to apply balances to meet quarterly requirements,at least for plan years beginning on or after 1/1/16 (if not sooner). They can only be based on the prior year's minimum - no breaks if 90% of the current year's minimum is lower.

2. Questions had been raised whether an election to use balances before the first quarterly deadline sufficient to cover all 4 quarterly amounts could take into account interest, piece by piece, on all 4 quarterly amounts until used (that is, it had been suggested that interest on the amount elected only runs from the beginning of the plan year to the date of election). That appears to have been overturned by the new regulations, which clearly indicate that each unused piece of elected balance would accrue, for purposes of satisfying quarterlies, interest to the date the quarterly was due.

3. Even better, the regulations restore the pre-PPA ability to credit interest on unused pieces of cash contributions from the date made to the date applied against a subsequent quarterly, at least for plan years beginning on or after 1/1/16.

We are amending our plan to allow unforeseeable emergencies as permissible payments.

Does anyone happen to know whether, after the amendment, a participant can withdraw amounts from before the amendment? Or does the amendment only allow payments of amounts deferred after the amendment? Does it matter if the emergency occurred before or after the amendment?

Any guidance would be greatly appreciated. Thanks.

I've always used 14 A as the starting point for figuring out plan compensation.

I see a lot of returns have both 14 A and 14 C figures, with C oftentimes quite a bit larger than A. Why the disparity? C is from the 'nonfarm option'.

Why the big disparity?

All these doctors & lawyers can't all have farm businesses on the side, can they?

Some 401(k) recordkeepers offer an optional service, for an incremental fee, under which the recordkeeper will review a domestic-relations order to decide (but for the plan administrator's rubber stamp) that an order is a QDRO.

For those that offer such a service, does the recordkeeper allow the plan's administrator to specify how the expense is allocated among participants' accounts? Can the allocation be proportionate across all participants' balances?

Does a recordkeeper require or permit an allocation of these QDRO-service expenses only to the account that is the subject of a division or proposed division?

Does the recordkeeper provide an indemnity to stand behind the accuracy of its decision or recommendation?

Is this kind of service worthwhile?

Of the big 403(b) providers, which of them offers an IRS-preapproved prototype or volume-submitter document (or a document so intended)?

The following is a detailed calculation of the 2013 415 limit for a sample participant:

10 Years of Service

7 Years of Participation - 4 years in prior DB Plan and 3 in CB Plan

GAR94 for the plan mortality table

5.50% for the plan interest rate

Normal Retirement Age of 62

Frozen DB accrued benefit of $2,896, which is due from the Plan

Single Life Annuity as normal form of benefit

RP2000 projected to 2013 for applicable mortality

5.00% for applicable interest rate

12/31/2012 CB hypothetical account balance of $276,635.

5.00% CB interest credit

415 Comp Limit

3-Year Average Salary of $250,000 x (10 Years of Service/10) = $250,000

415 Dollar Limit

Step 1 – Adjust for Age

- Plan assumptions = $205,000 x [N⁽¹²⁾@62/N⁽¹²⁾@51&7/12] x (1.055)^(62-51&7/12) {using no pre-retirement mortality, GAR94 post-retirement mortality, and 5.50% pre/post retirement interest} = $98,413

- Applicable assumptions = $205,000 x [N⁽¹²⁾@62/N⁽¹²⁾@51&7/12] x (1.050)^(62-51&7/12) {using applicable mortality (RP2000 projected to 2013) and 5.00% interest with no pre-retirement mortality since benefits are non-forfeitable} = $102,329

Step 2 – Adjust for Participation

Lesser of Plan and Applicable from Step 1: $98,413 x (7 Years of Participation from 2007 to 2013/10) = $68,889

Step 3 – Reduce for Frozen DB benefit already earned

Value of DB Accrued Benefit payable at age 51 years, 7 months = ($2,896 x 12)* [N⁽¹²⁾@62/N⁽¹²⁾@51&7/12] x (1.055)^(62-51&7/12) = $16,683

415 Dollar Limit after DB AB offset = $68,889 - $16,683 = $52,206

Step 4 - Convert to Present Value

Lesser of:

$52,206 x a⁽¹²⁾@51&7/12 using plan rates/mortality = $773,442

$52,206 x a⁽¹²⁾@51&7/12 using 5.50% interest and applicable mortality = $774,246

Step 5 – Reduce for Cash Balance benefit already earned

Final 415 Dollar Limit = $773,442 – $276,635 x 1.05 (Project 1/1/2013 Cash Balance to 12/31/2013 since limit determined at end of year) = $482,975

Final 415 Limit is lesser of Comp Limit of $250,000 and Dollar Limit of $482,975, which is $250,000.

Per the Plan, participant receives a Contribution Credit of 100% of pay limited to the DB 415 limit of $160,000 (as adjusted), which is $205,000, so the 2013 415 limit would not apply. Do you agree? If not, then where would you change the calculation?

Thanks in advance for any help!

I have a new plan with 4 employees, one of which is an HCE. I have allocated the Profit Sharing based upon the age-weighted formula as stated in the document.

I was under the impression that I needed to run the general test since this allocation method is not a safe harbor allocation formula. When I run the test, the plan fails 401(a)(4). Only 1 NHCE has a EBAR that is greater than the HCE's EBAR. It does not appear that the general test was run last year. How do I fix the allocation to get the plan to pass? What options do I have?

I'm working DB Plan but with very limited knowledge in Defined Benefit Retirement Plan administration.

My employer uses Sunguard Relius software and I'm struggling to fully understand the Internal Actuarial Data (IAD) Report for a single owner DB plan.

The Benefit formula is 14% of Average compensation X Year of Participation Up 5

The owner attained age was 68 with 1 Year of Participation and 4 years of future participation, and his NRA is 72

The Highest three consecutive years Average compensation is over $260,000

Reviewing the IAD

-Accrued Plan Benefit = $2,807, which appears to be calculated using 5% & 1994 GAR

Is there any specific reasons why the 5% &1994 assumption used?

-The 415 limit = $2,818.71, which appear to be calculated using 5% & 2011 Applicable

Is there any specific reason why the 5% & 2011 Applicable assumption used?

-Accrued Plan PV = $252,573, which appears to be calculated using 5.5% & 1994 GAR

Is there any specific reason why the 5.5% & 1994 GAR assumption used?

-415 PV = 256,550F, which appears to be calculated using 5.5% & 1994 GAR

Is there any specific reason why the 5.5% & 1994 GAR assumption used?

-How should the Minimum Required Contribution (MRC), the Target Normal Cost (TNC), the Funding Target (FT) calculated for this particular case.

Finally, I was told we need three PVAB calculated, including PVAB for Funding, PVAB for Testing, and PVAB for GATT. The PVAV for Funding is the one that needs to be used in determining he MRC, TNC & FT. Why?

Please explain me the step by step process in getting me understand this DB valuation concept.

Thanks!

Lexus!